May 19, 2009 in Business

Homebuilders hopeful that slump may be easing

Trade official sees ‘good signs’
Associated Press
 
Associated Press photo

A new house under construction sports a sold sign in Tigard, Ore. The National Association of Home Builders said Monday its housing market index increased for the second month in a row in May, reflecting growing optimism on the part of many builders.
(Full-size photo)

Lowe’s beats earnings forecast

Lowe’s Cos. Inc. said shoppers buying paints, plants and replacement parts in the first quarter helped the home-improvement chain beat Wall Street forecasts and prompted it to boost its full-year outlook.

The results sent the company’s shares higher Monday as the company said that business was “less bad” in all regions of the country and that economic conditions may – slowly – be improving.

Lowe’s results helped buoy the broader market and also raised expectations for rival Home Depot Inc., set to report first-quarter results early today.

For the three months that ended May 1, Lowe’s said it earned $476 million, or 32 cents a share. That’s down nearly 22 percent from the previous year’s profit of $607 million, or 41 cents a share, but was well ahead of forecasts.

LOS ANGELES – Homebuilders are growing more optimistic about the state of housing and say they see signs that the end of the housing market’s three-year downward spiral may be near.

The increasingly upbeat mood was reflected in an index of builders’ confidence released Monday, which rose for the second month in a row in May.

A separate report by the industry’s trade group showed housing affordability improved in the first three months of this year amid falling home prices and low interest rates.

“The bottom line is there are good signs on the horizon,” said Jerry Howard, president and chief executive of the National Association of Home Builders. “It’s fair to say we could be closing in on the bottom, but we have a long road ahead of us.”

The National Association of Home Builders/Wells Fargo housing market index rose two points to 16 in May. While still near historically low levels, the latest index reading is the highest since September.

The report reflects a survey of 733 residential developers nationwide, tracking builders’ perceptions of market conditions. Index readings lower than 50 indicate negative sentiment about the market.

The index hit an all-time low of 8 in January as mounting layoffs, strict mortgage requirements and the worsening U.S. economy sapped demand for new homes.

Index readings for current sales conditions and expectations for sales over the next six months each increased in May.

The gauge for traffic by prospective buyers was flat.

Meanwhile, the Washington-based trade group’s Housing Opportunity Index, which measures buyers’ purchasing power, rose to its highest level in 18 years.

A family earning the U.S. median income of about $64,000 could afford around 73 percent of all the homes sold in the first quarter, said David Crowe, NAHB’s chief economist.

Crowe has forecast that the housing market will begin picking up toward the end of this year and turn around by 2011.

Builders, however, still face challenges getting loans from banks to finance new construction projects, while many borrowers must comply with more stringent standards that often require them to come up with more money for a down payment.

Howard welcomed reports that the Department of Housing and Urban Development will allow borrowers to put the $8,000 tax credit for first-time homebuyers toward down payments on a home – still a hurdle for some would-be buyers.

“This is an important step,” Howard said.

Last week, HUD Secretary Shaun Donovan said the Federal Housing Administration soon will allow its borrowers to get short-term loans and turn the $8,000 tax credit into a down payment.

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